Time to Renew?

Jeff Evans

With a blink of an eye, five years is over and you’re starting to get the notices reminding you that your mortgage is up for renewal. You may have conveniently gotten your renewal papers in the mail from your lender offering you a rate that’s lower than what you were paying before (this is because current mortgage rates are at a historical low). It’s easy to just sign on the dotted line and mail it back, but if you stop and think about it, by signing these papers, you’re locking yourself into yet another long term contract.

If you’ve done this before, you’re not alone. Research has shown that most consumers stay with the same lender when renewing a mortgage. Statistics also show that people who spend a bit of time shopping around during renewal time, tend to save more in the long run.

Do you have enough information to make an educated decision about your mortgage? What are some of the options you have?

In order to find the right mortgage product for you, you’ll need to ask yourself what your long-term goals are. Is it to be mortgage free as soon as possible? Or do you need increased cash flow for upcoming expenses like starting a family or saving for a child’s post-secondary fund?

Mortgage options can really provide the flexibility you need to meet your long-term goals. With a little knowledge and the help of a mortgage broker, you could end up saving a lot of money in the long-run.

Mortgage Transfer

This option is best for renewal time, especially if you have a high ratio mortgage (value of mortgage exceeds 80% of your home). A mortgage transfer allows you to move your existing mortgage to a new lender. There are minimal costs involved since lenders will primarily absorb the cost to process a mortgage transfer. You will still need to provide all of the documents required for a mortgage application and there may be an appraisal cost (depending on the loan to value – calculated based on the size of your mortgage divided by the assessed value of your home).

Mortgage Rate Increase and Blend

This option should be used with caution and is relevant if you have more than 3 years left on your mortgage term and you’re worried that mortgage rates will go up soon. The concept of this option is to allow you to increase the amount of your mortgage. The increased amount will be at the current mortgage rate, which is then blended with your existing mortgage.

Mortgage Rate Blend and Extend

On top of the ability to increase your mortgage amount with the blend and increase option, some lenders allow you to extend your mortgage as well. For example, if you have three years left, you may have the option to extend your mortgage to a new 5 year term.

Again, this option should be used with caution.

With all these options and others, it’s important to have a real understanding of what each entails. A mortgage specialist can really help you in understanding the options available and which ones could be helpful in achieving your financial goals.

Don’t walk into a mortgage renewal blindly. Contact us today and we’ll find you the mortgage product that’s right for you.


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